MONEY TALKS: But what does your salary say?

In 1999, the economy remained extremely strong and as a result, retail sales were the highest ever recorded in the past decade. According to the U.S. Census Bureau, 1999 total retail sales reached $3 trillion, an 8.9% increase. The economic forecast for 2000 is also positive. However, even with strong retail sales, the sector may not flourish as it has in the past.

The reason? As 1999 came to an end, the amount of space available for lease significantly exceeded the demand. While this trend is expected to continue in 2000, the gap between supply and demand is expected to decrease. Another concern is that new construction seems to have peaked in 1998 and has been decreasing throughout 1999, with data forecasts predicting more of the same.

While the retail industry may not have a record year in 2000, the industry still remains fairly strong. One of the newer, more exciting developments is taking place in what once loomed as a large fear for those in the retail industry: e-commerce.

To begin with, fears that the use of "e-commerce" or "e-tailing" would unseat traditional shopping formats did not come to fruition in 1999. This is not to suggest that e-tailing should be disregarded by the retail industry, rather companies are now looking to integrate these technological advances into their business strategy in order to enhance their overall business.

Throughout history, as customers' needs have grown and changed, the retail industry has also evolved in order to meet the customers' demands. For example, consider Wal-Mart, which is the largest retailer of its kind. This company found success by making its stores bigger, but soon discovered that there was a point where a single store could actually become too large, overwhelming customers.

In today's world the public is definitely showing an interest in e-tailing as an alternate form of shopping. As a result, companies have begun to initiate Internet strategies.

Two major players that have already taken steps to develop Internet strategies are Taubman Centers and Simon Property Group. With these companies leading the way, it is more than likely that 2000 will witness a growing number of other companies doing the same. In a recent report by Media Metrix, a company that provides demographic data about the web, the Internet and online service usage, of the 50 most frequently visited websites, almost half were existing brick-and-mortar retailers that had expanded to include online communications.

Of concern to retail companies will be the need to attract key personnel to head up these technological advances in online activities. Many companies have been quick to discover that individuals with the appropriate skills set to develop Internet strategies are not readily available in the real estate industry.

Rather, management has been forced to look outside the industry for staffing. In an economy where the labor market is already extremely tight, information technology professionals are in top demand.

In order to be competitive in attracting information technology professionals, companies cannot rely on the pay structures that have been typically used. It will be necessary to be creative in developing long-term incentive plans that can compete with those being offered by other industries, while still considering how current employees are being compensated.

Another critical issue is that as companies hire new employees and incur costs in developing or upgrading their websites, the overall effect will probably be an initial loss this year where Internet operations are concerned as compared to 1999's figures. It is to be hoped that an upswing will occur in the following years.

Base salaries fluctuate Interest in the retail real estate industry's compensation trends remains strong as the participation in the 2000 study matched that of last year's record-high participation level. This year's participants again included several mega-corporations and regionally focused enterprises. This year's survey includes compensation data on more than 1,750 incumbents. Table 1 summarizes the salary information for 21 positions organized into the following categories: staff, leasing, construction, development and operations.

For most positions, we observed base salary increases in the 4% to 12% range, which was slightly greater than last year's 5% to 7% range. However, the average increase was still not dramatically different from 1999's.

Certain areas of the organization did receive slightly stronger increases than others. The marketing positions and leasing positions received increases that frequently ranged from 8% to 15%. As supply begins to exceed demand, strong leasing and marketing efforts will be required to fill the empty space.

An examination of the high and low salary ranges demonstrates the wide dispersion of compensation for positions that have the same basic level of responsibility. While the difference in salary level can normally be attributed to a few key variables, the scope of the position and pay philosophy, another aspect which should be considered is the geographic differential.

Geographic salary differentials While the compensation information presented in this article represents a national average, questions often arise regarding the variances in pay for cities across the United States. There are two key issues that individuals should be aware of when exploring the idea of geographic salary differentials.

Pay practice differences are not necessarily the same as cost of living differences. The classic example is Boston, which has a high cost of living, is very desirable by young professionals and has relatively modest salary levels.

Geographic differentials tend to have less of an influence on higher salary levels. For example, an administrative assistant in Des Moines, Iowa, will be paid far less than the same position would receive in New York City. However, chief executive officers are less affected by geographic differentials; rather, industry, company size and performance are more significant factors when considering pay.

In the next section, we examine if the increase in salary dispersion continues into total annual compensation through the use of annual incentives or commission awards.

Annual incentives Annual incentives continue to be the primary vehicle for motivating and rewarding employees, with bonus awards in the retail sector remaining competitive within the larger context of the real estate industry. Compensation packages for some positions are structured to reward maximum results. For example, in leasing and property operations, pay is usually leveraged so that annual bonus and/or commission is the largest component of compensation, with a relatively modest base salary.

In Table 2, we present total annual compensation figures. Total annual compensation is defined to include the sum of an incumbent's base salary plus their annual incentive, bonus or commission payment. Bonus payments made in 2000 or at the end of 1999 were, in most cases, for performance during the 1999 year.

Total annual compensation in 1999 was up for most positions. However, the increases were more varied than in the prior year. Table 3 summarizes the increases in total annual compensation by functional area from 1998 to 1999.

1999 compensation reflected the emphasis of marketing and leasing needs due to the increase in supply over demand. Additionally, the development of e-commerce has also played a key role in marketing activities.

The year 1999 proved to be an interesting one for the retail industry. As mentioned, performance was strong. However, shopping center owners and managers were more reserved in rating their financial performance over the past year. While 80% reported positive results in regard to their performance, only 25% of that group reported that it was the best year ever.

In comparison, in 1998, 90% of the companies reported positive results in financial performance, with 45% reporting that it was the best year ever. Additionally, this year 5% of the companies actually reported that their financial performance was significantly worse than last year as opposed to 1998, when none of the companies reported performance that was worse than the prior year.

Future considerations While the forecasts for 2000 are promising, members of the retail industry should be prepared for financial performance that may not be as strong as in past years. Base salary increases will likely be minimal and in some cases may remain stagnant.

Continued emphasis should be placed on bonuses, because in uncertain times employers may be more comfortable with increases in variable pay vs. fixed pay.

Additionally, employers may want to consider adding more emphasis to company benefits. For example, companies may want to adopt a 401(k) plan. If such a plan is already in place, the company may want to increase its match to the plan. Finally, it will be important to pay close attention to the industry as it partners itself with e-tailing. Distinct compensation trends are likely to emerge in the next few years.

A study of the members of the National Network of Commercial Real Estate Women (NNCREW) recently revealed that the number of women working in a firm is one of the biggest factors affecting women's attitudes, even more than ownership, status, professional specialty, income or length of time in industry.

SPHERE OF INFLUENCE According to the study, the number of women professionals in a firm can have a powerful influence on a variety of factors.

* NNCREW members who work in offices with higher proportions of female employees tend to see themselves as less tough and aggressive than those who work in offices with lower proportions of women.

* A perceived gender gap in support is greatest for those members who work with more women.

* NNCREW members who work at companies with lower proportions of female employees tend to be less satisfied with their level of pay.

* The challenge of gender discrimination is more commonly perceived in firms employing lower proportions of women.

WORKPLACE AGENDA Gender discrimination and equal pay for equal work are the leading challenges reported by NNCREW members.

* 36% of NNCREW members report gender discrimination, the glass ceiling or stereotyping of women as the leading challenge. The second leading concern involves balancing work and family.

* 70% of the members feel that they get paid less than men in the same industry doing the same work.

* 81% of the respondents said their jobs offered flexible hours, and more than 60% of respondents said they planned to remain working in the field until retirement.

* 68% of NNCREW members have expectations of stability with respect to the commercial real estate economy over the next six months. Of the rest, twice as many expect it to get better, 20%, compared to 10% who expect it to worsen.

NNCREW MEMBER PROFILE According to the survey, NNCREW members:

* Earn significantly more money than the average working woman; the median annual income is well above $100,000

* Are full- or part-owners of their firms (31%)

* Cluster in the 35-49 age bracket

* Have a higher level of education than the average working woman

* Average eight to 15 years' experience working in the field

* Describe themselves as independent

* Plan to start their own firm (25%)

* Manage other employees in their firm (75%)

The study, sponsored by Julien J. Studley Inc., was conducted by Washington, D.C.-based Lake Snell Perry & Associates Inc. The survey involved telephone calls to more than 600 women working in commercial real estate who are members of NNCREW, a real estate network whose members represent every professional discipline related to the industry. It has 41 member organizations and 4,500 members. The survey's margin of error is plus or minus 4%.